The proportion of consumers with recent BNPL accounts who need help addressing unsustainable debt has grown more than 50% since 2021, according to the first study from the Achieve Center for Consumer Insights
SAN MATTHEW, Calif., September 22, 2022 /PRNewswire/ — The rapid growth of Buy Now Pay Later (BNPL) financing has had a cascading effect on consumer debt levels, according to a new study from Achieve, the leader in digital personal finance.
The full study (available here) found that a growing number of people already stressed by debt are taking advantage of BNPL financing to stretch their available credit limits before needing assistance to address unsustainable debt levels.
Achieve Consumer Insights Center
The study is the first in a series planned by the new Achieve Center for Consumer Insights, an ongoing initiative that leverages Achieve’s team of digital personal finance experts to provide insight into the status of Achieve members, with a particular emphasis on emerging data and trends. in personal loans, consumer debt and home equity loans.
In addition to sharing insights drawn from Achieve’s proprietary data and analytics, the Achieve Center for Consumer Insights intends to publish in-depth research, custom data, and thoughtful commentary in support of Achieve’s mission to help ordinary people track and stay on the road. to a better financial future.
“We are introducing the Achieve Center for Consumer Insights along with the debut of the new Achieve brand and our expanded suite of digital personal finance offerings reflects our commitment to supporting every step of our members’ financial journeys. We look forward to helping educate consumers on the state of their finances and keeping them up to date on economic developments affecting household balance sheets,” said Achieve Co-Founder and Co-CEO. brad stroh. “In addition, we hope that the data and research produced by the Achieve Center for Consumer Insights will foster a thoughtful dialogue among financial services and technology professionals, academic and advocacy groups, policymakers, and other stakeholders.”
Effect of BNPL on consumer debt
From june 2022the percentage of Achieve resolution members with BNPL accounts on their credit reports has grown 58% compared to January 2021. While the segment of Achieve resolution members with BNPL business lines is still relatively small, it is also likely to be underrepresented in the total reach of the BNPL industry because very few BNPL transactions are currently reported to the three major credit bureaus. .
Many BNPL users can use this financing to extend their credit limits on existing credit cards and other accounts. according to Achieve data, even though BNPL is often promoted as a product designed for consumers who want to avoid credit cards and other traditional forms of credit.
Reach Resolution Members with BNPL loans on their credit reports have more open business lines on their credit file than members without BNPL loans. They also have more total business lines, which include both current business lines and previous accounts that were closed less than 10 years ago, reported on their credit files. Achieve members with BNPL accounts had slightly higher credit card usage rates than Achieve Resolution members without. They also had lower average credit scores than members without BNPL accounts. However, BNPL users had slightly higher family incomes (see Figure 1).
“The ongoing expansion of the scope of the BNPL industry comes alongside a period of historic inflation and rising interest rates that are putting pressure on household finances,” said the Achieve co-founder and co-CEO. andres housser. “Buy now, pay later may be attractive to consumers looking for an interest-free option to pay for purchases over time. But even without finance charges, consumers can overextend themselves with these loans.”
The average balance in Achieve resolution members’ BNPL accounts has decreased since the beginning of 2021, reflecting the widespread availability of BNPL as a digital payment option at physical and virtual points of sale. In june 2022, almost 50% of Achieve resolution members with at least one BNPL account were Millennials and about a third were Gen Xers. Achieve’s findings echo a recently published study Consumer Financial Protection Bureau Studywhich highlights the growth in the volume of BNPL loans and consumer late charges.
Additional Key Findings from Achieve Resolution
Evolving financial difficulties : Medical expenses have become the number one reason consumers seek Achieve help with their debt., reflecting a continuing trend that began in early 2021 (see Figure 2). Reduced income and job loss continue to account for a large part of members’ hardships, but have decreased over this same time period.
Generational changes: Millennial and Gen Z members seeking debt help through Achieve resolution have grown since then January 2021 , while the proportion of Silent Generation and Baby Boomer members is declining (see Figure 3). There are strong parallels between Gen Xers and Millennials in many key credit metrics, even though the average age of Gen Xers enrolled in the Achieve Resolution is 15 years older than that of Millennials (see Figure 4). ). The two generations have comparable credit scores, family incomes and credit histories; however, Gen Xers average more business lines of credit reporting. Additionally, the youngest three generations have higher median household incomes than Achieve Resolution members from the Silent and Baby Boomer generations.
Key Findings from Achieve Personal Loans
Deal with debt: Debt consolidation and credit card refinancing are the top reasons Achieve members get personal loans , consistently accounting for more than half of all new loan originations since the beginning of 2021 (see Figure 5). However, the portion of affiliates that use personal loans to pay for large purchases is increasing, representing 19% of the loans obtained in june 2022.
Personal loan profile: Achieve Personal Loan members had an average of 11 open business lines when applying for a personal loan at june 2022. Loan amounts range from less than $10,000 to finish $35,000with an average beginning loan balance of just over $20,000. Key credit metrics for Achieve personal loan members remain largely unchanged from a year ago, with the exception of the average credit score, which decreased slightly in june 2022 (see Figure 6).
Make way for millennials: Millennials represent a growing share of loan volume , and the proportion of Achieve personal loan members from the Baby Boomer generation is declining, reflecting a similar trend in Achieve resolution. Loans for members of Generation Z were almost non-existent in 2021, but now they represent 2% of transactions in june 2022 (see Figure 7).
Key Findings from Achieve Home Equite Loans
Secure access to home equity: Members who took out a home equity loan from Achieve to consolidate unsecured debt in june 2022 save an average of $669 per month compared to your previous monthly debt obligations (see Figure 8).
Achieve’s Home Equity Line of Credit (HELOC) program is designed to help borrowers responsibly access equity to pay down debt or build cash reserves, without jeopardizing their investment goals. long-term home ownership. Members who obtained a HELOC from Achieve to consolidate their unsecured debt into june 2022 saved an average of $669 per month in payments compared to your prior monthly debt obligations (see Figure 8).
Monthly Savings: Average beginning balances on Achieve Home Equity Loans have been between $43,000 Y $59,000 of January 2021 a june 2022 with an average opening balance of $55,579 (see Figure 9). Average monthly savings vary over time and by borrower, due to differences in debt amount, interest rate fluctuations, and other individual and market-based factors. As January 2021Achieve Home Equive Loan members have reduced their debt payments by an average of $746 per month.
Credit Score Improvement: Members typically see their credit scores increase, plus improve your monthly cash flow after consolidating debt with an Achieve Home Equity Loan (see Figure 10). Achieve Home Equity Loans are structured as fully utilized, fixed-rate HELOCs, allowing members to continue to access their home equity as needed throughout the contract period.
The full study, with graphs and data, can be viewed on the Achieve website or downloaded as a PDF of the report here.
Achieve is the leader in digital personal finance. Our solutions help ordinary people get started and stay on the path to a better financial future, with innovative technology and personalized support. Leveraging proprietary data and analytics, our solutions are tailored to every step of a consumer’s financial journey and include personal loans, home loans, debt help, and financial tools and education. Achieve is headquartered in San Mateo, Calif. and has more than 2,700 dedicated employees across the country with locations in California, Arizona Y Texas. The company is regularly recognized as a Best Place to Work.
The data reflected above is based on a representative sample of over 100,000 members who used Achieve Resolution, Personal Loan and Home Equity Loan offerings. January 2021 a june 2022. Data and findings represent products and services offered by Achieve and its affiliates, including Bills.com, LLC d/b/a Achieve.com (NMLS ID #138464); Freedom Financial Asset Management, LLC (NMLS ID #227977); Release Resolution (NMLS ID 1248929); and Lendage, LLC d/b/a Achieve Loans (NMLS ID #1810501).
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